“It is as important to manage your personal finances as it is to manage your business finances,” says Ramit Sethi, author of “I Will Teach You to be Rich” and founder of GrowthLab.com, created to help entrepreneurs.
He says often freelancers and business owners stay busy and therefore assume business is profitable.
“At the end of the year they look at how much money they make, and they are shocked to discover they actually didn’t make as much as they thought or in many cases, they actually lost money,” he says.
Sethi says self-employed professionals need to have their personal finances organized, optimized, and automated. That means bills should be on autopay and they should be investing every single month outside of their business and in long-term investments.
Setting rates
When it comes to determining how much to charge clients, don’t undervalue yourself.
“The most common pricing mistake that business owners make is they think that the only way to get more clients is to lower their prices,” Sethi says. “This makes perfect sense because most people in life are cheap. So, most business owners think their clients are cheap. This is a fatal mistake.”
While it’s important to understand the market rate and to know what your competitors charge, your focus should be on how you can overdeliver your services and so charge top of the market.
“The best clients do not care about price as much as they care about getting the job done,” says Sethi. “They care about trust, reliability, and skill.”
He says everyone has one thing they’d pay anything for, such as a favorite product or restaurant.
“If your business is that one thing to your client, price is not the first, second, or third consideration,” he says. “And that is a great place to be in business.”
Work for free?
While it’s a controversial idea, working for free could be a smart move for a freelancer. Sethi advises only working for free if it helps you build a network where you want to work with someone trusted who can introduce you to other clients.
You can choose to work pro bono, but steer clear of anyone who asks you for free work. “Run far away from those people,” he says. “They’re not even clients, they’re freeloaders.”
Financially literate
It’s critical for business owners, including freelancers, to be financially literate. Freelancers must understand more than just the product or service they’re offering. They must also know how to effectively monetize it.
“It’s not enough to be passionate about the work you do,” Sethi says. “I believe you get passionate when you are succeeding in your mission, and your mission as a business has to include being profitable. Otherwise you’ve just got a hobby.”
Small changes
Often, entrepreneurs think they have to triple their clients to grow their business but that’s not necessarily the case. Instead, do higher value work for higher value clients.
“Small changes can dramatically grow your business,” says Sethi, noting those changes can include how much you charge, how many clients you get, and how often they buy.
Invest in yourself
He encourages self-employed professionals to listen to their customers and understand what the customers truly want. Next, invest in yourself by taking business training
“If you are not willing to invest in yourself and your business, then why should your client be willing to invest in yours?”